Property Management

Property management covers running a rental from day to day, including finding tenants, collecting rent, arranging repairs and answering tenant calls, and owners often hire a manager for it. The management fee is an operating expense, so it reduces cash flow and cash on cash return.

Fees are commonly quoted as a percent of collected rent, and the default inputs use 8%, or about $4,742 a year. Some managers also charge leasing fees for placing a new tenant and markups on repairs. All of it belongs in the expense lines when you project a return.

Include a management fee even if you plan to self-manage. It keeps the return honest, lets you compare deals on the same terms, and shows whether the property still works if you hand it off later. A deal that only clears your target without management depends on your unpaid labor.

Further reading: Property Management on Wikipedia.